The contradictory compassion of progressives

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State Sen. Toni Atkins, D-San Diego, right, smiles up at the Senate Gallery after she was sworn in as the new Senate President pro tempore, Wednesday, March 21, 2018, in Sacramento, Calif. Atkins replaces former Senate President Pro Tem Kevin de Leon, D-Los Angeles, left. In the center is Lt. Gov. Gavin Newsom applauds Atkins, who becomes the first woman to lead the California Senate. (AP Photo/Rich Pedroncelli)

California has long been in the forefront of “compassionate” progressive politics, whether by repeatedly hiking the minimum wage or expanding rent control via Proposition 10. Unfortunately, such policies rest on logic that is not just flawed, but mutually contradictory.

Both the minimum wage and rent control, though they force prices in opposite directions, reduce the quantities exchanged in those markets. That makes them counterproductive “compassion” for those unable to sell sufficient labor services or purchase sufficient housing services. But the rhetoric employed disguises their worsening of those problems.

For the low-skilled, minimum wage advocates frame the issue as “If you could earn more per hour, wouldn’t you be better off?” The obvious answer is Yes.” But that presumes someone being willing to work more at higher wages means they will be able get that additional work, when government imposes the increase.

The problem is that mandated higher wages will reduce employers’ hiring of their services. Rather than selling more services at higher wages, such workers will actually sell fewer labor services, and some will be completely priced out of jobs.

Symmetrically, rent control advocates frame that issue as “If you could rent for less, wouldn’t you be better off?” But that presumes that wanting more housing at a lower rent means people will be able to get it, when government imposes rent caps.

The problem is that rent caps will reduce how much housing landlords are willing to offer (though because of housing’s durability, it can take some time to see the magnitude of the effects). Rather than getting more housing at reduced rents, prospective renters will face reduced housing availability.

Beyond worsening the problems facing many financially-strained families in the labor and housing markets, the argument for higher minimum wages shows the glaring error in the argument for lower rent ceilings, and vice versa.

If higher mandated wages increase willingness to offer labor services, lower wages must reduce workers’ willingness to offer labor services. But such symmetry implies that rent controls will also reduce landlords’ willingness to provide housing, so that rent control will restrict rather than expand tenants’ housing options.

Worsening the problems caused by minimum wages and rent controls is that both increase discrimination against the poor, the least-skilled and other disfavored groups. The surplus of low-skill laborers at higher minimum wages decreases the cost to an employer of turning away any applicant with undesirable characteristics in their eyes (including lower skills), because there are sufficient applicants without them. Similarly, the shortage of rental housing under rent control decreases the cost to a landlord of turning away applicants with any undesirable characteristics in their eyes (including higher probabilities of non-payment).

Advocates for minimum wages and rent controls justify both as compassionate. But they ignore the far-from-compassionate violations of employers’ and landlords’ property rights those policies impose. And the logic of one is mutually inconsistent with that of the other, which renders compassionate intentions moot. Both present many of those intended to be helped with worsened options, a very questionable form of progress.

Gary M. Galles is a Professor of Economics at Pepperdine University, an Adjunct Scholar at the Ludwig von Mises Institute, a Research Fellow at the Independent Institute and a member of the Foundation for Economic Education Faculty Network. His books include Apostle of Peace (2013), Faulty Premises, Faulty Policies (2014), and Lines of Liberty (2016).